Friday, February 11, 2011

The Future Fall of Nokia and Apple's "Potential" White Flag

I usually don't do two postings in a day because I don't have that much to blog about. However, today is different because there have been two significant pieces of news out there. The first is confirmed and the second is in the rumor stage.

To the first piece of news, Nokia has killed Symbian and made a deal with Microsoft to produce Windows Phone 7 phones. This has got to be the beginning of the end of Nokia. Nokia's strength was their innovation in hardware and software. Nokia along with Motorola basically laid all the groundwork for the modern cell phone market. Without them, there would be no smartphones or even regular cell phones.

Nokia's announcement comes at a time when their ship has been sinking. So much so its practically the actual words by the new CEO at the USA branch. Nokia has pretty much rested on their laurels and made incremental updates to their painfully dated OS, Symbian. New slides from their recent announcement show no Symbian in the future with even less Meego (if that was even possible).

I've read some posts about that this seems like a coup. This same thing happened when I worked at Ryan's Steakhouse in my town. They merged with Old Country Buffet and then OCB started shutting down Ryan's around the country. Obviously Nokia hasn't merged with Microsoft, but there's always a possibility.

The new CEO is a former Microsoft employee. This is obviously where they drummed up the idea for using WP 7. Nokia had announced that they would seek an outside ecosystem to work off instead of internal software development. There was some initial hope that Android would make its way to Nokia, but that was to not be the case. With the new CEO's former ties, Android is only a competitor that he seems very eager to squash.

The problem is it won't happen. Even if WP 7 can be shrank to work on low end phones, we're talking about a major transition for long time users of Symbian. Most people when committed to something, prefer not to change. If they are forced to, they gravitate towards something that replicates the feel of their lost tech. Android gained its strength from being just like iOS. Anyone who had ever used a iPod Touch or an iPhone had a pretty good idea how to work the basics of Android. This made the transition easier.

No, I think Nokia will lose even more ground from this endeavor. Eventually, if they lose enough market share, which is very possible considering Android and iOS's growth, Microsoft may get the potential to buy the company. Also, the loss of Symbian is going to put many of its programmers out of jobs. This will all around hurt the company. They may get some short term gains, but at the cost of long term stability as WP 7 isn't yet proven unlike its two competitors. In the end, Nokia will fade into the dust. A tragic loss of a great company.

On the rumor front, it's believed that Apple may be attempting to create a low-end version of the iPhone to compete with Android. Android has a major strength in the fact that the OS is scalable and fits on a variety of devices. Android does have a problem with fragmentation, but that too could become Apple's problem if they attempt to fill that niche.

Unless the specs for the new phone(s) are similar to the iPhone 4, you're probably going to see some apps that won't make their way onto the weaker model. This could cut into the app sales which is really where Apple makes a good chunk of its money. There will still be iTunes, but chances are most of those people already have an iPod Touch or an iPhone.

Apple wants to bring the potential phone in at $200 off contract, the same price as the T-Mobile Comet or the LG Optimus One. Of course, one still has to keep a data plan on phones purchased on contract, so I'd hazard to guess why would anyone bother with a low-end limited capability iPhone when they could just pay a little more for the real thing. Sure Apple could clean up with off contract sales, but why not just mod the iPod Touch hardware some and slap a radio in it for a little more than it currently costs. Apple has been talking about dual band GSM/CDMA radios for their iPhones. This would allow them to sell off contract unlocked phones on their brand name and be successful in an area where Google failed. They may already be doing this.

Still, this seems like raising the white flag to Android. They would effectively be conceding the fact that they're not competing as well. The marketing department might be able to spin it to Apple zombies, but I think the true tech nerds would see this. The reality of this is that Apple probably would have never attempted to release a low-end iPhone if Android would have never came onto the scene. Apple's profit margins are huge and this would effectively cost them some money in profitability. Is it a bad idea? Of course not. Many people choose not to get the iPhone because of the network or the cost. However, many people choose other phones because they are NOT Apple. Still, if even a small percentage of people buy this new phone, Apple will have gained more market share at the cost of letting Android give them the "I told you so" look.